German Utilities Produce More, Pollute Less

Suddenly, there is great concern over Germany's use of coal. Media reports suggest that increasing amounts of Germany's power originate from coal. Special interests are using these reports to elevate their causes. Underlying this flurry is the assumption that Germany's utilities are polluting more. That assumption is wrong.

The issue is not how much power originates from coal. The issue is how much pollution originates from Germany's power sector. It turns out that while higher percentages of German power originate from coal, pollution has not increased.

Efficiency Is Vital

The more efficient a plant, the less pollution it produces. Germany figured out how to increase its reliance on efficient power plants and decrease its reliance on inefficient units.

Relevant data come from the Bundesnetzagentur, an agency within the German Federal Ministry of Economics and Technology. Like the U.S. Energy Information Administration (EIA), the Bundesnetzagentur maintains and publishes a detailed inventory of all German power generating assets.

Germany has about 135 coal-fired power plants. Within the last several months, 26 of those plants were retired, and over 4,200 megawatts were retired. The average size of the 20 recently retired plants was 142 megawatts, which is small. The average age of those same plants was 52 years.

Typically, old and small coal-fired plants are inefficient and have high heat rates. High heat rates mean units require more fuel to produce less electricity. As such, they pollute more and waste energy.

While Germany was retiring old clunkers, it replaced them with modern units. Over the last 10 years, Germany built nine new coal-fired plants at an average size of about 510 megawatts. Of the 4,580 megawatts built, most were commercialized within the last four years.

Typically, new and large coal-fired plants are more efficient. They have lower heat rates, and that means they burn less fuel to produce the same amount of power. They also pollute less. The German fleet of coal plants has approximately the same capacity, but it produces less waste and pollution.

Some of the efficiencies achieved by German engineers are truly amazing. RWE AG claims that its new lignite-fired power plants are reaching 43% efficiencies. The company's hard-coal-fired power plants are reaching efficiencies approaching 46%.

By comparison, Europe averages about 36%. In the U.S., some coal units struggle to achieve 25%.

For Germany, 43% efficiency is the beginning. About 60% of its coal-fired capacity is dedicated to combined heat and power (CHP). That means CHP owners capture and monetize waste heat from its coal-fired power plants. It also means CHP power plant systems can reach 80% efficiency.

Producing Less Power

Alarmists are rigging numbers to make matters appear worse than they are. They claim that utilities are using more coal as a percentage of power generated. They rarely mention that Germany's net generation from natural gas has been declining at a rate faster than any increase in coal.

Fraunhofer ISE makes the point crystal clear. It reports that Germany's power production from coal increased in 2013 by 7.7 terawatt-hours. At the same time, the change in power production from natural gas decreased by 10.5 terawatt-hours. Taken together, Germany's power production from all fossil fuels declined by 2.8 terawatt-hours.

There is more. Energy production from Germany's nuclear units declined by 1.9 terawatt-hours. Production from hydroelectric declined by 1.2 terawatt-hours. Their solar power increased by increased 1.8 terawatt-hours. Wind power production increased by 1.3 terawatt-hours. Adding everything together, Germany saw a net decline in power production of 3.1 terawatt-hours.

The conclusion is undeniable. While the percentage power originating from coal may have increased, that percentage is against a smaller total.

Lower Pollution

The argument about Germany's coal-fired power plants is a distraction. Germany's utilities are not increasing their pollution.

The German environmental agency, the Umweltbundesamt, confirms the conclusion. It recently issued a preliminary report that details CO2 emissions from the power sector. It concluded that CO2 emissions "are practically unchanged year over year."

The patterns found in Germany are largely replicated in the U.S. A major difference is natural gas; we have lots of it, and Germany cannot get enough.

As in Germany, the U.S. fleet of commercial nuclear power plants is shrinking. As in Germany, U.S. utilities such as Duke Energy (DUK), American Electric Power (AEP) and NRG Energy (NRG) are retiring old, small and inefficient coal-fired power plants. Like Germany's RWE AG, Southern (SO) is finishing construction of its clean-coal power plant. Like Germany, U.S. producers of solar and wind power are becoming relevant.

U.S. power markets, like those in Germany, are forcing inefficient units out of the bidding. As inefficient units are sidelined, pollutions levels are dropping. However, Germany is teaching the U.S. a lesson: Coal is not going away. Coal fleets will become more efficient and less polluting.

For the U.S., long-term winners will be developers of transport integrated gasification (TRIG) technology. TRIG is a new coal-gasification method that has low impacts to the environment. TRIG was developed by Southern and KBR (KBR) with Department of Energy funding.